The Missouri legislature passed HB 3231 in the final week of the spring session, the House 119–24 after the Senate had already cleared the bill, and transmitted it to Governor Mike Kehoe, who has 15 days to sign or veto. He is expected to sign. Ron Kitchens, Managing Partner of Greater St. Louis Inc., described the passage as "a great day for Downtown St. Louis and downtowns and Main Streets across Missouri." The characterization is accurate for St. Louis. Whether it is accurate for the rest of Missouri depends on which provisions practitioners are paying attention to.

Most coverage of HB 3231 has focused on the office-to-residential tax credit provisions, because those are the provisions that address the Railway Exchange Building and the AT&T Tower, the two large vacant downtown St. Louis structures that have anchored the city's office vacancy narrative since 2017. Those provisions matter and are explained below. The innovation zone designation, which received less coverage, is the provision with the most significant implications for district governance across the state.

The tax credit mechanism: what it does and what it actually unlocks

The core tax credit provisions: a 25 percent credit for converting office buildings at least 25 years old into residential, retail, or other commercial uses; a 30 percent credit for comparable projects in smaller communities that qualify as "main street districts" under existing state designation frameworks; and early cash-flow advances of up to 25 percent of projected state income-tax withholdings generated by construction jobs, which addresses the common gap between when developers incur costs and when tax credits become accessible for monetization.

The annual program cap is $50 million in tax credits. Half of that cap ($25 million per year) is reserved for buildings larger than 750,000 square feet. That carveout is not subtle about its intent. In Missouri, the buildings larger than 750,000 square feet and currently vacant or significantly underutilized are essentially two structures: the AT&T Tower (1.4 million square feet, vacant since 2017, recently acquired by Goldman Group for $3.6 million) and the Railway Exchange Building (1.24 million square feet, vacant since 2013, currently under city eminent domain action against its Florida-based owner). Combined, these two buildings represent approximately 2.6 million square feet, nearly half of all vacant office space in downtown St. Louis, and have been documented by the Brookings Institution as the primary drivers of the city's elevated office vacancy rate.

The Goldman Group's proposal for the AT&T Tower: 600 market-rate apartments and 80,000 square feet of retail, dining, and event space. The developer described the legislation as necessary for the project to be financially viable. The previous math: converting a large office building to residential costs approximately 15 percent more than new construction, while downtown St. Louis rents do not yet support the premium. The 25 percent tax credit changes that math, closing the gap between what the project costs and what the market currently supports.

AT&T Tower & Railway Exchange: Conversion Feasibility Math
Construction cost per sq ft vs. achievable residential rents vs. required return, with and without 25% tax credit

The innovation zone provision: a self-funding mechanism for public safety and infrastructure

The provision that has received less coverage in the general press is the innovation zone designation. Under HB 3231, localities can apply to the Missouri Department of Economic Development for innovation zone designation. Once designated, the city retains 50 percent of all new state sales taxes and income-tax withholdings generated inside the district. The retained funds are legally restricted to a specific list of uses: police services, lighting, security cameras, signage, sidewalks, streets, landscaping, and public safety and infrastructure needs more broadly.

The program runs for 10 years and then requires legislative reauthorization. The 50 percent retention applies only to the increment: the new state tax revenue generated above whatever baseline existed at designation. Existing state tax revenue flows as normal; the innovation zone captures the growth layer.

This is a structurally novel mechanism for Missouri district governance. Most special district instruments (TIFs, CIDs, TDDs) capture incremental local tax revenue (property tax increment, local sales tax surcharges) for infrastructure investment. The innovation zone captures incremental state tax revenue and redirects it to specific local uses. The state is, in effect, agreeing to give back a portion of the new economic activity it would otherwise collect from the district, and constraining that repatriation to public safety and infrastructure uses.

For a downtown corridor that has been struggling to fund police presence, camera systems, and infrastructure maintenance from assessment revenue alone (which is the operating situation of most recovering urban downtowns), the innovation zone creates a dedicated revenue stream that grows with the corridor's commercial recovery without requiring an assessment rate increase or a new levy.

What the innovation zone means for Missouri district managers

The innovation zone's self-funding logic creates an alignment that most district managers have been looking for and have not been able to produce through existing instruments. An ambassador program funded by assessment revenue is paid for by property owners and businesses that assess themselves. An enhanced police presence funded by innovation zone revenue is paid for, in effect, by the new commercial activity that the district's investments generated. The assessment-payers are not being asked to fund public safety on top of their existing assessment obligation. The distinction matters politically and practically.

For Missouri cities with active CIDs, TDDs, or DDAs that are managing recovering commercial corridors: the innovation zone designation is not the same as those instruments and does not replace them. It is a state-level funding mechanism that operates alongside existing district structures. A corridor with an active CID and a designated innovation zone would have the CID assessment funding baseline services and programming, while the innovation zone funds the public safety and infrastructure layer that assessment revenue typically cannot fully cover.

The specific eligible uses (police services, cameras, lighting, signage, sidewalks) are exactly the categories where assessment-funded districts are most constrained. Assessment revenue is restricted to the services and improvements specified in the district plan, and property owners are reluctant to approve assessment plans that dedicate large percentages to police services that feel like substitutes for general government responsibility. The innovation zone removes that political constraint: the public safety funding comes from a different revenue source, one that the property owners and businesses in the district created through their economic activity.

The 10-year program window with a reauthorization requirement creates a sunset mechanism that state legislators can use to evaluate whether the innovation zone designations are producing the economic development outcomes the program is intended to generate. For district managers operating inside an innovation zone: documenting the economic activity generated by district investments, in a format that the state legislature can use to evaluate the reauthorization case, becomes a political obligation, not just a governance best practice.

The Railway Exchange as the test case for both provisions

The Railway Exchange Building is the property where both HB 3231's provisions will be tested simultaneously. The tax credit provision is necessary to close the financing gap for a 1.24-million-square-foot conversion that combines complex historic preservation requirements with downtown St. Louis's current rent environment. The innovation zone provision is necessary to fund the public safety and infrastructure improvements in the blocks immediately surrounding the Railway Exchange that are required to make a residential conversion competitive with suburban alternatives.

A building that produces 600 or more residential units, which is well within what the Railway Exchange's footprint could support, generates state income-tax withholdings from those residents and, indirectly, state sales tax from their retail spending in the corridor. If the innovation zone captures 50 percent of that new revenue and directs it to police services and camera systems in the surrounding blocks, the Railway Exchange conversion is not simply a real estate transaction. It is a self-funding district investment: the conversion generates the revenue that pays for the public safety infrastructure that makes the conversion viable.

Steven Stogel, who has been publicly working on a Railway Exchange redevelopment plan, described the legislative effort that produced HB 3231 as "awe-inspiring" in its bipartisan character. The specific provisions that make the Railway Exchange financeable, the large-building carveout in the tax credit cap and the innovation zone's public safety funding mechanism, were designed in deliberate response to the specific obstacles the Railway Exchange and AT&T Tower face. The bill's sponsors understood the transaction they needed to enable.

Ron Kitchens, Managing Partner of Greater St. Louis Inc., on the bill's passage: "This is a great day for Downtown St. Louis and downtowns and Main Streets across Missouri."

What happens next and what the timeline looks like

HB 3231 Implementation Timeline
Legislative passage → Governor signature → Tax credit availability (Jan 2027) → 10-year program window

Governor Kehoe's 15-day signature window begins from the date of legislative transmittal. If he signs, the tax credits become available in January 2027, with the innovation zone designation process beginning through the Department of Economic Development. For developers with active projects, including Goldman Group on the AT&T Tower and any qualified developer responding to the Railway Exchange RFP, the January 2027 effective date creates a 6-to-7-month window for project structuring and financial modeling before credits are accessible.

For district managers in other Missouri cities watching this: HB 3231 is not exclusively a St. Louis bill. The 30 percent tax credit for main street districts and the innovation zone designation are available statewide. Any Missouri city with a significant vacant commercial building and a recovering downtown corridor should be evaluating whether the innovation zone designation applies to their situation. The Department of Economic Development will be developing the application criteria and process; district managers and city economic development directors who get into those conversations early will have more influence over how the criteria are written than those who engage after the framework is finalized.

Key Takeaways

Sources

Fox2Now, Missouri bill heads to governor, May 14–15, 2026. St. Louis Public Radio, May 14–15, 2026. KBIA, May 15, 2026. First Alert 4, April 16, 2026. St. Louis Magazine, March 2025 and June 2024. Missouri House Bill 3231 text. Brookings Institution, "Reversing an Urban Doom Loop in St. Louis Through Office-to-Residential Conversion." Prior Plat Street coverage: RW·1·3·9 (Missouri Innovation Districts Act, pending); BO·1·3·6 (St. Louis downtown recovery data).